The Bank of England has launched a consultation on draft supervisory expectations for central counterparties (CCPs) seeking to accept tokenised versions of eligible assets, such as government bonds, for margin and default fund requirements. The proposals clarify how collateral standards would apply under the proposed UK CCP Rulebook, including the requirement for high liquidity and minimal credit and market risk. They would cover UK CCPs and recognised overseas CCPs that are, or are likely to become, systemically important to UK financial stability. CCPs would be expected to demonstrate that they can access, transfer and realise tokenised collateral within required timeframes in both normal and stressed conditions. Liquidity and valuation assessments should not assume that tokens share the characteristics of their conventional equivalents, particularly where conversion depends on intermediaries or markets operate different hours. Credit assessments should capture exposures introduced by tokenisers and other providers, while concentration assessments should aggregate exposures to the same underlying issuer or asset across tokenised and conventional forms. CCPs should also establish when transfers become final and ownership rights enforceable. Operational and custody assessments should demonstrate how access and control would be maintained or restored following service provider failures, infrastructure disruption or compromised cryptographic keys. Tokenised versions of previously accepted assets would remain subject to relevant regulatory approval processes where their delivery mechanisms or risk characteristics differ. Unlike the Bank’s separate proposal to permit uncollateralised letters of credit for initial margin, this consultation does not propose expanding the eligible collateral list. It nevertheless seeks evidence on potential future use of regulated stablecoins, tokenised money market fund units and tokenised gold, including whether the draft expectations would adequately address their risks. Stablecoin acceptance would require a rule change or permission to waive or modify the relevant rule, alongside other applicable approvals.
Bank of England consults on supervisory expectations for CCP acceptance of tokenised collateral
The Bank of England is consulting on how central counterparties should assess tokenised versions of eligible collateral for margin and default fund contributions. Proposed expectations address liquidation under stress, enforceable ownership and settlement finality, and management of credit, operational and custody risks. The consultation does not propose widening collateral eligibility, but explores potential future use of regulated stablecoins, tokenised money market fund units and tokenised gold.